We have all seen the commercial for the emergency button you wear for when you fall down and can't get up, right? We need one of those for the grain and livestock markets -- they are falling and can't seem to get up.
But we know there isn't a magic button for markets and sometimes they fall hard, causing farmers and producers a great deal of heartburn wondering if and when the markets will ever turn around.
Markets create major challenges, fooling most of the people most of the time. However, that is always a problem when most traders and speculators follow the herd, the news and other things instead of following the footprints of the markets. Those who can come to the realization that price is king and the rest is noise are those that stay away from the masses, the panic and the puke.
There are sayings in all markets, but none more pertinent than "high prices cure high prices" and "low prices cure low prices." The facts are simple when you are in the business of speculation: There is one guaranty -- you will be emotionally tested and be forced to make decisions for all of your chips. When the world around you is collapsing and everyone you know is holding an air sickness bag worried about the collapse, you should be the one to sit back take a deep breath and realize you are being handed an opportunity to capitalize on a market that is in turmoil.
Markets trade in different phases. The common thread is always price, not the news and certainly not the opinion of others. Markets are driven more by emotion than anything else, the news is almost always priced in. Markets and speculation is a game and a competition, the winners of the game are those that can separate their emotions from the facts. Those that act on emotion very rarely will win the game most of the time, making the wrong decision and creating a bigger problem.
Last week we saw possibly the ultimate emotional decision when banks started calling notes as the grain and livestock markets were getting drilled. They forced their clients to liquidate -- at for now is the bottom of the market. Forced liquidation is a common problem when dealing with human emotion and ultimately creates great opportunities for those who can control their emotions.
One of the easiest ways to create successful opportunities is to be hedged and protecting the downside of the market, which will keep your emotions out. Be prepared to take advantage of the markets when they are in distress instead of being in the herd of those panicking. If you are prepared, you will always be able to get up.
Keep those stops tight!
The views, opinions and positions expressed by the author are theirs alone and do not necessarily reflect the views, opinions or positions of Pro Farmer."